2009 (12) TMI 124 - AT - Service Tax

Cenvat credit allowed for garden maintenance services used in or relating to manufacture or taxpayer's business activity

CESTAT, MUMBAI - AT held that Cenvat credit on garden maintenance services is admissible where such services are used in or in relation to manufacture of ... Input service - used in or in relation to the manufacture - activities relating to business - services used in relation to setting up, modernization, renovation or repairs - CENVAT credit eligibilityInput service - activities relating to business - used in or in relation to the manufacture - CENVAT credit eligibility - Garden maintenance service is an input service within the meaning of rule 2(l) of the Cenvat Credit Rules, 2004 and eligible for Cenvat credit where it relates to the business of the manufacturer. - HELD THAT: - The Tribunal examined rule 2(l)'s definition of 'input service' and the limbs of that definition, noting the separate inclusive list of services 'such as' activities relating to business and services used in relation to setting up, modernization, renovation or repairs. Relying on the reasoning in Coca Cola India (Bombay High Court) and this Tribunal's decisions, the term 'activities relating to business' and the phrase 'in relation to' were held to have a wide ambit, such that services falling within the illustrative list need not be shown to be used specifically 'in or in relation to' the manufacture of the final product. The Tribunal distinguished the Apex Court's observations in Maruti Suzuki as concerned with the definition of 'input' (goods) and not determinative of the broader scope of 'input service.' While earlier Tribunal decisions denying credit on the ground of lack of nexus were noted, the Tribunal accepted the Coca Cola reasoning that services which relate to the functioning of the business and have a relation with the manufacturer's business activity qualify as input services. Applying these principles to the facts, the Tribunal concluded that garden maintenance contributes to the business environment and working efficiency and therefore falls within the definition of input service entitling the appellant to Cenvat credit. [Paras 7, 14, 17, 20, 22]The appeal is allowed and Cenvat credit availed on garden maintenance service is held to be admissible as an input service relating to the business.Final Conclusion: The Tribunal held that garden maintenance service qualifies as an 'input service' under rule 2(l) because the inclusive limb of the definition covers services 'relating to business;' accordingly the appellant's claim for Cenvat credit on garden maintenance service is allowed. Issues Involved:1. Denial of CENVAT credit on garden maintenance service.2. Whether garden maintenance service qualifies as an 'input service' under rule 2(l) of the CENVAT Credit Rules, 2004.Issue-wise Detailed Analysis:1. Denial of CENVAT Credit on Garden Maintenance Service:The appellant filed an appeal against the denial of CENVAT credit on garden maintenance service. The primary issue was whether such a service qualifies as an 'input service' under rule 2(l) of the CENVAT Credit Rules, 2004.2. Whether Garden Maintenance Service Qualifies as an 'Input Service':The appellant's advocate cited the case of Millipore India Ltd. v. CCE, where the Tribunal held that services related to modernization, renovation, and landscaping of factory premises are considered 'input services' under rule 2(l) of the CENVAT Credit Rules, 2004. Conversely, the respondent's representative relied on the Kirloskar Oil Engines Ltd. v. CCE decision, which stated that garden maintenance service has no nexus to the manufacture or clearance of excisable goods.Definition of Input Service:The definition under rule 2(l) of the CENVAT Credit Rules, 2004, includes services used directly or indirectly in relation to the manufacture of final products and their clearance from the place of removal. It also encompasses services related to setting up, modernization, renovation, or repairs of a factory, advertisement, sales promotion, market research, and other business activities.Analysis of Relevant Case Law:The learned DR referenced the Coca-Cola India (P.) Ltd. v. CCE decision, which divided the definition of input service into five categories, emphasizing that services used in relation to business activities are eligible for CENVAT credit. The High Court in this case clarified that input services must be allowed as long as they form part of the assessable value of the final products.Comparative Analysis of Input and Input Service:The Maruti Suzuki Ltd. v. CCE case was cited to argue that inputs must be used in or in relation to the manufacture of final products to be eligible for credit. However, the definitions of 'input' and 'input service' are not identical. The definition of 'input' is restrictive, focusing on goods used in manufacturing, while 'input service' is broader, covering various business-related activities.Tribunal's Findings:The Tribunal found that the definition of input service under rule 2(l) is broader and includes services used in relation to business activities. The Coca-Cola India (P.) Ltd. decision was not considered in the Kirloskar Oil Engines Ltd. case. The Tribunal emphasized that garden maintenance contributes to a better working environment, enhancing efficiency and creating a positive impression on consumers.Conclusion:The Tribunal concluded that the appellant is entitled to CENVAT credit for garden maintenance services, as these services are used in relation to business activities. The appeal was allowed, affirming the appellant's right to avail of the CENVAT credit on garden maintenance services.